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Exam 17: Corporations: Introduction and Operating Rules

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Question 41

True/False

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The due date (not including extensions)for filing a 2010 Federal income tax return for a calendar year C corporation (Form 1120)is April 15,2011.

A) True
B) False

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Question 42

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The dividends received deduction may be subject to a limitation based on a percentage of taxable income computed without regard to the NOL deduction,the domestic production activities deduction,the dividends received deduction,and any capital loss carryback to the current tax year.

A) True
B) False

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Question 43

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Which of the following statements is incorrect regarding the dividends received deduction?

What is the purpose of Schedule M-3? Which corporations are required to file Schedule M-3?

Albatross,a C corporation,had $125,000 net income from operations and a $10,000 short-term capital loss in 2011.Albatross Corporation's taxable income is $115,000.

Owl Corporation,a C corporation,recognizes a gain on the sale of a § 1250 asset in the current year.Owl had used the straight-line method for depreciating the realty.Some of Owl's gain on the sale of the realty will be treated as depreciation recapture (ordinary income).

Bear Corporation has a net short-term capital gain of $35,000 and a net long-term capital loss of $200,000 during 2011.Bear Corporation has taxable income from other sources of $600,000.Prior years' transactions included the following: Compute the amount of Bear's capital loss carryover to 20117.

During 2011,Sparrow Corporation,a calendar year C corporation,had operating income of $510,000,operating expenses of $370,000,a short-term capital loss of $25,000,and a long-term capital gain of $80,000.How much is Sparrow's tax liability for 2011?

On December 31,2011,Flamingo,Inc.,a calendar year,accrual method C corporation,accrues a bonus of $50,000 to its president (a cash basis taxpayer),who owns 75% of the corporation's outstanding stock.The $50,000 bonus is paid to the president on February 1,20117.For Flamingo's 2011 Form 1120,the $50,000 bonus will be a subtraction item on Schedule M-1.

Briefly describe the accounting methods available for adoption by a C corporation.

Ostrich,a C corporation,has a net short-term capital gain of $40,000 and a net long-term capital loss of $180,000 during 2011.Ostrich also has taxable income from other sources of $1 million.Prior years' transactions included the following:

Azul Corporation,a calendar year C corporation,received a dividend of $50,000 from Naranja Corporation.Azul owns 10% of the Naranja Corporation stock.Assuming it is not subject to the taxable income limitation,Azul's dividends received deduction is $35,000.

Norma formed Hyacinth Enterprises,a proprietorship,in 2011.In its first year,Hyacinth had operating income of $400,000 and operating expenses of $240,000.In addition,Hyacinth had a long-term capital loss of $10,000.Norma,the proprietor of Hyacinth Enterprises,withdrew $75,000 from Hyacinth during the year.Assuming Norma has no other capital gains or losses,how does this information affect her taxable income for 2011?

During the current year,Coyote Corporation (a calendar year C corporation)has the following transactions:

Compare the basic tax and nontax factors of doing business as a partnership,an S corporation,and a C corporation.Circle the correct answers.

During the current year,Waterthrush Company had operating income of $510,000 and operating expenses of $400,000.In addition,Waterthrush had a long-term capital gain of $30,000.How does Lucinda,the sole owner of Waterthrush Company,report this information on her individual income tax return under following assumptions?

During the current year,Thrasher,Inc.,a closely held personal service corporation,has $67,500 of active business income,$52,500 of portfolio income,and $120,000 of passive loss.How much of the passive loss can Thrasher deduct in the current year?

For a corporation in 2011,the domestic production activities deduction is equal to 9% of the higher of (1)qualified production activities income or (2)taxable income.However,the deduction cannot exceed 50% of the W-2 wages related to qualified production activities income.

Unlike individual taxpayers,corporate taxpayers do not receive a preferential tax rate with respect to long-term capital gains.

In the current year,Amber,Inc.,a calendar C corporation,has income from operations of $200,000 and operating deductions of $225,000.Amber also had $30,000 of dividends from a 25% stock ownership in a domestic corporation.Which of the following statements is incorrect with respect to Amber's net operating loss deduction?